A:

Bonds usually can be purchased from a bond broker through full service or discount brokerage channels, similar to the way stocks are purchased from a stockbroker. Dealing with a bond broker can be prohibitive to some, however, because many require high minimum initial deposits. Another way to gain exposure in bonds would be to go in directly through a bond fund - a mutual fund that only purchases bonds.

When using a broker to purchase bonds, often you will be told that the trade is free of commission. What often happens, however, is that the price is marked up so that the higher price you are charged essentially includes commission fees. If the broker isn't earning anything off of the transaction, he or she probably would not offer the service. To determine the markup before purchase, look up the latest quote for the bond and use your discretion to decide whether or not the commission fee is a markup you are willing to accept. (To learn more about what to look for in a broker, make sure to read our related article Evaluating Your Broker.)

Government bonds work slightly different than traditional bonds. Some financial institutions provide services to their clients that allow them to purchase government bonds such as Treasuries (U.S.) or Canada Savings Bonds (Canada) through their regular investment accounts. If this service is not available to you through your financial institution, these securities can be purchased directly from the government. In the U.S., bonds can be purchased through TreasuryDirect.

To learn more about bonds, how they work, and how to obtain them, be sure to check out our Bond Basics Tutorial.

RELATED FAQS
  1. What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ... Read Answer >>
  2. Where can I buy government bonds?

    The type of bond determines where you can purchase it, so you need to decide which type of bond you would like to purchase ... Read Answer >>
  3. Why are simple-interest loans preferred by payday loan companies and pawn shops?

    Learn how you can invest in the corporate bond market without investing a large amount of capital through bond funds and ... Read Answer >>
Related Articles
  1. Investing

    The Basics Of Bonds

    Bonds play an important part in your portfolio as you age; learning about them makes good financial sense.
  2. Investing

    Investing in Bonds: 5 Mistakes to Avoid in Today's Market

    Investors need to understand the five mistakes involving interest rate risk, credit risk, complex bonds, markups and inflation to avoid in the bond market.
  3. Investing

    Corporate Bond Basics: Learn to Invest

    Understand the basics of corporate bonds to increase your chances of positive returns.
  4. Financial Advisor

    How Brokers Are Compensated for Selling Bonds

    Find out how brokers are paid for selling bonds and how the transaction costs are passed on to the investor through a markup or commission.
  5. Investing

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  6. Investing

    The 4 Biggest Bond Myths

    Bonds can be a great addition to a portfolio but be aware of these four myths.
  7. Investing

    Bond Funds Boost Income, Reduce Risk

    These funds can provide stable returns for those who depend on their investment income.
  8. Investing

    Top 6 Uses For Bonds

    We break down the stodgy stereotype to see what these investments can do for you.
  9. Retirement

    Should I Invest in Bonds After I Retire?

    Yes, retirees should invest in bonds, but remember that not all bonds are safe investments. Seek the help of a financial advisor.
  10. Investing

    Pros & Cons Of Bond Funds Vs. Bond ETFs

    Understanding the pros and cons of bond funds and bond ETFs will help you choose the instrument that is best for building your diversified bond portfolio.
RELATED TERMS
  1. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
  2. Discount Bond

    A bond that is issued for less than its par (or face) value, ...
  3. Bond Broker

    A broker who executes over-the-counter bond trades between institutional ...
  4. Bond

    A debt investment in which an investor loans money to an entity ...
  5. Bond Yield

    The amount of return an investor will realize on a bond. Several ...
  6. Dollar Price

    The percentage of par, or face value, at which a bond is quoted. ...
Hot Definitions
  1. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that decreased and eventually eliminated tariffs to encourage economic activity ...
  2. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  3. Derivative

    A security with a price that is dependent upon or derived from one or more underlying assets.
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such ...
  6. Death Taxes

    Taxes imposed by the federal and/or state government on someone's estate upon their death. These taxes are levied on the ...
Trading Center